The key to success in commercial real estate investing is knowing how to negotiate a good deal. Commercial realtors need to know a lot more than the details about a specific property in order to close on a sale. They must employ a number of techniques to effectively negotiate a positive deal for their investor buyers by using knowledge of local market conditions, individual property, and even how motivated a seller may or may not be.
Learning About the Deal
Negotiations on investment properties begin with commercial realtors learning as much as they can about a number of things. First and foremost, they must know enough about the seller to understand why they are selling and how a successful property deal can solve their immediate problem. It is also important to know how the seller is financed, whether they own other properties, if they are self-managed, and how long they have owned the property.
In addition, realtors must know current local market conditions and trends, understand property values, and have a good idea of the forecast for similar properties within the local market. Armed with this information, agents representing buyers interested in commercial real estate investing can negotiate an acceptable deal.
Common Negotiating Techniques
Once commercial realtors are educated about a property and the seller, they can use a number of different techniques to negotiate a favorable deal for their investor clients, which may include tactics such as:
- Counter Offers - Almost all negotiations on any kind of real estate involve offers made by one party that are countered by the other party. These counter offers may continue back and forth until an agreement is reached. Brokers can opt to use other tactics as well.
- Nibble Tactic - Nibbling is a way that brokers try to gain additional concessions for buyers by waiting until the deal is ready to close, then requesting something else. If the seller believes that closing the deal might hinge on giving into small demands or nibbles, they may grant it.
- Tradeoff Technique - This is another common tactic used in commercial real estate investing to help both buyers and sellers get more of what they want from a deal. Tradeoffs are basically compromises on both sides, allowing each party to give and get a bit until both parties are in agreement.
- Doorknob Technique - This tactic is one that can be very successful when properly executed, although realtors and their clients must be prepared to walk away if the other party does not cooperate. The doorknob tactic is simply the action of getting up from the bargaining table as if ready to leave, then wait for the other party to resume negotiations with another offer.
- Putting it All In Writing - There are times when simply putting all offers and details in writing for the other party can demonstrate that the buyer is serious and not simply wasting the seller’s time. Verbal negotiations may go back and forth for a while on commercial deals; however, when a broker takes the time to document the offer details, they gain credibility and often additional bargaining power.
Along with these techniques, commercial realtors may use a number of other more aggressive techniques, depending upon individual circumstances and the parties involved. In any case, successful negotiation in commercial real estate investing typically involves the skilled use of techniques that can demonstrate buyer interest and sincerity while getting as many concessions as possible. Investors looking for a great advantage in their real estate deals needs to work with experienced agents!